Romania, struggling to refinance its debt at home, will extend a programme to sell 7 billion euros in medium-term notes (MTNs) abroad and could tap the US market by early 2011, its deputy finance minister said. Under the programme, Romania will be ready to issue euro notes in mid-October and will consider tapping dollar debt later on, Bogdan Dragoi told Reuters in an interview late on Wednesday.
MTNs are an alternative way for Romania, which is the beneficiary of a 20 billion euro ($26.8 billion) aid deal led by the International Monetary Fund, to finance a soaring budget deficit after leu-denominated issues failed to meet the finance ministry's expectations.
An unstable political situation that threatens IMF-mandated reforms and rising inflation expectations have increased upward pressure on yields on Romanian domestic debt since early May.
Since then the finance ministry has all but refused to pay investors more than 7 percent interest, leaving it facing a funding crunch that threatens to come to a head in November when a 1.4 billion euro treasury bill matures. "We will extend the MTN programme to allow us to access the US market, for which different documents are needed, by the beginning of next year," Dragoi said.
"The US market has the advantage of being liquid and favouring long maturities. I'm not saying we will do it, but that we will have the possibility to do so."
The minister did not comment on the ministry's yield capping strategy, nor November's funding peak. Analysts have said foreign markets would be willing to buy the notes at considerably lower yields compared with local issues, as euro denomination would mean the finance ministry took over exchange rate risks from investors.
Dragoi also said Romania would issue future Eurobonds through the MTN programme, which he said was more flexible and allowed for a faster issuing process.